SALE OF APPLIED SPINE TECHNOLOGIES, INC.
Gerbsman Partners has been retained by Applied Spine Technologies, Inc. http://www.appliedspine.com to solicit interest for the acquisition of all, or substantially all, Applied Spine Technologies’ assets.
IMPORTANT LEGAL NOTICE:
The information in this memorandum does not constitute the whole or any part of an offer or a contract. The information contained in this memorandum relating to Applied Spine Technologies’ Assets has been supplied by Applied Spine Technologies. It has not been independently investigated or verified by Gerbsman Partners or their respective agents.
Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact. Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.
Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Applied Spine Technologies’ or Gerbsman Partners’ negligence or otherwise.
Any sale of the Applied Spine Technologies Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of Applied Spine Technologies and Gerbsman Partners. Without limiting the generality of the foregoing, Applied Spine Technologies and Gerbsman Partners and their respective staff, agents, and attorneys, hereby expressly disclaim any and all implied warranties concerning the condition of the Applied Spine Technologies Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.
This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.
COMPANY
Headquartered in Rocky Hill, Connecticut, Applied Spine Technologies, Inc. (“AST”) has developed the Stabilimax® System, the only true pedicle screw based dynamic stabilization system validated with Class 1 clinical data.
Founded in 2004, AST is a private, Connecticut-based, clinical stage medical device company. To date the Company has been financed with $47M over three venture rounds. Oxford Bioscience Partners and BioVentures Investors invested $4 million in Applied Spine’s Series A financing. The $15M Series B round was led by Interwest Partners and added DeNovo Ventures to our list of tier one investors. Investor Growth Capital and MB Venture Partners led the $28M C round.
The underlying premise of the Stabilimax System is that painful spine motion increases in an injured spine; Stabilimax treats pain by compensating for the instability and abnormal motion caused by degeneration or injury. It utilizes a novel double concentric spring mechanism that maximizes stiffness and support where the spine needs it most. By eliminating abnormal motion, the Stabilimax System eliminates the compensating load on the surrounding muscles and tissues, which should allow a return to near-normal physiologic motion, function and thus, tissue healing.
AST believes its assets are attractive for a number of reasons:
- Stabilimax. The Stabilimax® System is positioned to become the US market leader in the $250mm+ Pedicle Screw-Based Dynamic Stabilization segment1, upon successful completion of a clinical trial and PMA approval. OUS opportunities are possible currently, due to CE marked implant inventory and a 25 instrument set inventory to support a 200 surgery launch. The current inventory of implants, pedicle screws, implant components and instruments is valued at approximately $2.7M. There are no development costs to incur, and products are available immediately.
- Design. A true dynamic stabilization implant is one that has an optimum stiffness profile, permits interpedicular travel, and maintains a near normal center of rotation2. Quality of motion is as important as quantity3. The Stabilimax design, with its proprietary combination of springs and articulating junctures, utilizes pedicle screws and a posterior surgical approach, which appeals to surgeons due to a low (or no) learning curve. Motion is near normal kinematic, allowing for interpedicular travel, and respecting center of rotation. It is not a hinge, and therefore less harmful to the adjacent level.
- Clinical Data. Applied Spine has Class 1 data that validates the Stabilimax design rationale, and offers proof of IPT, ROM, and near normal kinematic motion. We have documented the typical stenosis patient’s pre op motion + IPT, and have recorded post op motion and IPT at 12 months for over 100 patients. Preclinical data shows stabilization in face of decompression to be 54% of Intact; Clinical data at the 12 month follow up mimics preclinical data (54% of PreOp). Measurement via Kinematic Indicator (IPT/ROM) shows consistencies with normal kinematics in preclinical and 12 month follow up.
- Intellectual Property. Applied Spine has 8 issued US patents, 1 notice of allowance, and 8 additional US patent applications in process with parallel filings in the EU. Patents issued include method patents of use of a dual spring dynamic stabilization device as well as apparatus patents covering the dual spring, specific travel and stiffness ranges for the dual spring, and the articulating spheres connection to the pedicle screw that enable intraoperative assembly. As a result, Applied Spine has both defensive and offensive positioning options.
- Defensive/Offensive Patent Position. The Company now has an established defensive position to protect the Stabilimax device. Specifically, the defensive patents would make it difficult to design a product that allows for the same amount of physiological motion while using springs. Additionally, the company is growing its offensive position through the ongoing prosecution of additional applications. Our patent counsel believes that the offensive patents/applications could read on other current devices. Furthermore, there are continuation patents in process on a variety of related subjects where claim language can continue to be refined to further the company’s offensive position.
- Competitive advantage. We have become the „last man standing‟ – the only true PMA/IDE product in the pedicle screw-based dynamic stabilization segment. Zimmer’s Dynesys was denied PMA by Panel; all other devices such as N-Hance (Synthes), and Transition (Globus) are caught under the FDA‟s 522 order and thereby exposed to labeling issues. As Stabilimax has no fusion labeling – and no 510(k) – this provides us an opportunity to secure first to market position in the US.
Impact of Technology on the Market
The potential positive impact of a pedicle screw based dynamic stabilization system that works in concert with the body’s natural biomechanics has attracted the attention of leading physicians worldwide. The relationship of providing stability without fusion has attracted many competitors but few have been able to support their product design rational with actual clinical data that validates the benefits. AST’s significant clinical data positions the Stabilimax system for robust market opportunities. Accessing AST’s intellectual property is critical for any successful endeavor into this very attractive market. Commercialization of its products could provide high returns in this large and fast-growing market.
Applied Spine Technologies Company Profile
Founded in 2004, AST is a private, Connecticut-based, clinical stage medical device company. To date the Company has been financed with $47M over three venture rounds. Oxford Bioscience Partners and BioVentures Investors invested $4 million in Applied Spine’s Series A financing. The $15M Series B round was led by Interwest Partners and added DeNovo Ventures to our list of tier one investors. Investor Growth Capital and MB Venture Partners led the $28M C round.
The Stabilimax is the culmination of over 30 years of focused research from Dr. Manohar Panjabi. Dr. Panjabi, recently retired from Yale University (2006), is regarded as a leading authority on spine biomechanics. He has conducted extensive research on spine implants, analyzing both fusion and motion-preserving devices. Dr. Panjabi has also published more than 265 original research papers, and written two textbooks: Clinical Biomechanics of the Spine, 1990; and Biomechanics in the Musculoskeletal System, 2000. The first of these remains to this day the iconic text for spine clinicians and researchers.
Presently the company has enrolled 146 patients in their IDE clinical study. Applied Spine received approval to start the clinical study in February 2007 with the first US patient enrolled in March 2007. As of July 2010, 60 single level patients and 36 two-level patients as well as 21 control patients will be at the two-year follow-up point. In February 2010, Applied Spine commenced enrollment with the second generation pedicle screw. In this enrollment group we enrolled 20 Stabilimax patients and 9 control patients. These patients will be at the one year follow-up point at the end of 2010.
Applied Spine Technologies’ Assets
AST has developed a portfolio of assets critical to the success of pedicle screw based dynamic stabilization for the lumbar spine. These assets fall into a variety of categories, including:
Patents, Patent Applications and Trademarks
- Encouraging Class 1 clinical data on over 100 patients shows reduction in pain, reduced adjacent level effects, and near-normal quality and quantity of kinematic motion.
- Product Inventory to support an immediate OUS sales launch
- Complimentary Product Designs
- Manufacturing, Design and Calibration Equipment
- CE Mark for the Stabilimax System
- Intellectual Capital and Expertise
The assets of Applied Spine Technologies, Inc. will be sold in whole or in part (collectively, the “Applied Spine Technologies’ Assets”). The sale of these assets is being conducted with the cooperation of Applied Spine Technologies. Applied Spine Technologies and its employees will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Applied Spine Technologies should not be contacted directly without the prior consent of Gerbsman Partners.
Key Personnel
- CEO: Craig Corrance joined in 2009; Previously CEO Scient’x, Altiva Corp
- CFO: Terry Brennan joined in 2005; Previously CFO CyVera and CiDRA Corporations
Applied Spine Technologies, Inc. Board of Directors
- Ellen Baron: Oxford Bioscience Partners – Boston, MA
- Stephen Campe: Investor Growth Capital (IGC) – New York, NY
- Marc Goldberg: BioVentures Partners – Boston, MA
- Michael Sweeney: Interwest Partners – Menlo Park, CA
- Craig Corrance:CEO, Applied Spine Technologies – Lake Mary, FL
The Bidding Process for Interested Buyers
Interested and qualified parties will be expected to sign a nondisclosure agreement (attached hereto as Exhibit A) to have access to key members of the management and intellectual capital teams and the due diligence “war room” documentation (the “Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has an opportunity to inspect and examine the Applied Spine Technologies Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.
Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Applied Spine Technologies Assets. Sealed bids must be submitted so that it is actually received by Gerbsman Partners no later than Friday, October 15, 2010 at 3:00 p.m. Central Daylight Time (the “Bid Deadline”) at Applied Spine Technologies’ office, located at 30 Cold Spring Rd, Rocky Hill, CT 06067. Please also email steve@gerbsmanpartners.com with any bid.
Bids should identify those assets being tendered for in a specific and identifiable way. In particular, please identify separately certain equipment or other fixed assets. The attached Applied Spine fixed asset list may not be complete and bidders interested in the Applied Spine equipment must submit a separate bid for such assets.
Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase where applicable. All bids must be accompanied by a refundable deposit check in the amount of $100,000 (payable to Applied Spine Technologies, Inc.). The winning bidder will be notified within 3 business days of the Bid Deadline. Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are the unsuccessful bidder.
Applied Spine Technologies reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all of the assets from sale. Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder and bidders may not have the opportunity to improve their bids after submission.
Applied Spine Technologies will require the successful bidder to close within a 7 day period. Any or all of the assets of Applied Spine Technologies will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.
All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Applied Spine Technologies Assets shall be the sole responsibility of the successful bidder and shall be paid to Applied Spine Technologies at the closing of each transaction.
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